Amendments to the Proceeds of Crime Act and the new Sanctions and Anti-money Laundering Bill: the UK’s answer to the Global Magnitsky Act?

Following the use of a nerve agent in Salisbury earlier this year, there were calls for the UK to adopt a British equivalent to the US Global Magnitsky Act, enabling the state to sanction gross human rights violations wherever or by whomever they are committed. This post considers the extent to which so-called “Magnitsky amendments” to Part 5 of the Proceeds of Crime Act (the “POCA“) through the 2017 Criminal Finances Act (the “2017 CFA“) and to a new Sanctions and Anti-Money Laundering Bill have achieved this, and what it means for both UK and international companies.

What is the Global Magnitsky Act?

In light of the torture and death in custody of Russian whistle-blower Sergei Magnitsky, the US adopted legislation allowing it to (amongst other things) freeze the assets of associated individuals. In 2016, the Global Magnitsky Act came into force, allowing the government to impose targeted sanctions on individuals anywhere in the world responsible for committing gross human rights violations.

What does the 2017 CFA say about gross human rights violations?

On 31 January 2018, the 2017 CFA came into force, with section 13 expanding the definition of “unlawful conduct” within Part 5 of POCA to include conduct that constitutes a gross human rights violation or abuse. It gives UK authorities the power to seize any and all assets which are generated by conduct linked to a gross human rights violation or abuse via a civil asset forfeiture action, wherever it occurs.

For conduct to qualify as gross human rights violation, and therefore be “unlawful conduct” for the purposes of POCA, it must either “constitute” or be “connected with” the following:

1.The torture – or the cruel, inhuman or degrading treatment or punishment – of a person who has sought:

(i) to expose illegal activity carried out by a public official or a person acting in an official capacity, or

2. The abuse is carried out in consequence of that person having sought to do anything falling within subsection (a)(i) or (ii).

3. The abuse is carried out by:

(i) a public official, or a person acting in an official capacity, in the performance or purported performance of his or her official duties, or

(ii) by a person not falling within (i) at the instigation or with the consent or acquiescence of a public official, or a person acting in an official capacity, who in instigating the conduct, or in consenting to or acquiescing in it, is acting in the performance or purported performance of his or her official duties.

A private actor, including a business, will be deemed to be “connected with” such violation if it acts as an agent for a perpetrator of the abuse, or it directs or sponsors, profits, or materially assists in such activities.

The threshold for liability is low; there is no explicit requirement to be aware of, or intentionally play a part in, the human rights abuse. Indeed, any gain made by the company need only “relate” to the unlawful conduct. Consequently, property could be liable to seizure without a company being aware of the connected abuse. Further, the liability is civil, rather than criminal, meaning that prosecutors need only prove on the balance of probabilities that a company is connected with human rights violations. There a 20-year limitation window in which to file a civil asset forfeiture action and the new law applies retrospectively to conduct which occurred, or property that was obtained, before the Act came into force.

How might this work in practice?

Consider the example of a plantation or factory owner who pays a public official to mistreat the ring-leader of a strike allowing production to continue uninterrupted. If the goods are then supplied to a purchaser in the UK who onwards sells them, inadvertently profiting from the uninterrupted supply chain, it could be seen to have profited from the gross human rights violation and those profits could be recovered under POCA.

What does the new Sanctions and Anti-Money Laundering Bill add?

A new Sanctions and Anti-Money Laundering Bill which is, at this very moment, going through parliament, was amended on 1 May 2018 under another “Magnitsky amendment”. The UK courts will be able to impose sanctions on individuals, companies and states found to be complicit in gross human rights abuses. “Gross human rights abuse” shall adopt the same definition as it has in the 2017 CFA, encompassing torture and cruel, inhuman or degrading treatment. This directly addresses the type of human rights abuse that was committed against Mr Magnitsky, as a whistle-blower, and further reinforces the protection bestowed by the “UN Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment”, which was ratified in English law in 1988.

The Bill is expected to become law in 2019 and has long been in the making. Indeed, the Magnitsky amendment passed without a vote, backed by both the Conservative and Labour Parties, and signalling a crucial step in the protection of human rights globally.

What does this mean for companies?

With “soft” law, such as the UN Guiding Principles, increasingly crystallising into “hard” law, international businesses will already appreciate the need to introduce and maintain robust human rights due diligence processes.

The introduction of the 2017 CFA and the impending Sanctions and Anti-Money Laundering Bill provide further reasons for companies to fulfil their responsibility to respect human rights and conduct thorough due diligence throughout their value chain. Specifically, companies should implement systems that allow for whistleblowing reports, protection of the whistle-blower and independent investigation. This will reduce the likelihood of civil liability under POCA as well as identify possible human rights violations within a supply chain that could ultimately lead to sanctions by the UK government. In what is a shifting regulatory environment, measures like these will go some way to future-proofing your business.

Julianne Hughes-Jennett is a Partner, Peter Hood is a consultant and Emily Gidda is a trainee in Hogan Lovells’ Business and Human Rights Group.

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